The CHAIRMAN. Yes.

Senator SALTONSTALL. Do not the words "Military Department" in this act, if it goes through in its present form, have to be defined? It is no longer an executive department, and the executive departments come under section 158 of the Revised Statutes. What is the meaning of the words "Military Department"? Do you think there has to be a definition of "Military Department" or do you think the

words are sufficient?

Mr. PACE. I think definition of the term "Military Department" would not necessarily be helpful. It does involve a large and complicated field and might be difficult of exact definition, Senator. Charlie, do you have something to add?

Mr. STAUFFACHER. I think the Senator is correct in that there is not now a definition of the term, although it was used in the National Security Act with a little different meaning than it has here. I think actually the meaning it has here merely taking it as a term by itself without reference to the several sections that serve to define it more precisely, is only that of a subordinate body within the executive department.

Senator SALTONSTALL. That is what I thought, too. When it was used in the National Security Act, "Military Department" was used synonymously with the words "executive department," I assume. Here you put it subordinate to an executive department and put it in a completely new status, and you give no exposition as to what that status is.

Mr. STAUFFACHER. The last section of the bill particularly which states that the Military Department of the Army shall be deemed to be the department succeeding the executive department of the Army, does in effect give it definition, although you are right in that the general term itself is not defined.

With respect, however, to those statutes which now apply to the Department of the Army, they would continue except as they are changed by the terms of S. 1269, and those are specific changes, they would continue to apply to the Military Department of the Army, so that in that sense it does have within the bill some definition. Senator SALTONSTALL. Would you be willing to bear that in mind, Mr. Pace, in suggesting amendments?

Mr. PACE. Yes; I think the suggestion merits thought.

Senator SALTONSTALL. May I ask, if it is in order at this time, another question right along that line?

The CHAIRMAN. Yes.

Senator SALTONSTALL. Did you see the testimony of Mr. Eberstadt to this committee?

Mr. PACE. Unfortunately, I have not had an oportunity to read it. I am familiar with it in general.

Mr. STAUFFACHER. I am familiar with it in general.

Senator SALTONSTALL. The suggestion is to strike out section 3 completely from the act and that the same things can be accomplished by the elimination of section 3. In other words, if that is accomplished, your three departments would still continue to be executive departments, I would assume, but you would give the Secretary of Defense a specific power over them, specific authority over them, and you would also redefine the duties of the Chiefs of Staff.

I wondered if you had given consideration to that suggestion, which goes far along the line of what you want and accomplishes what Senator Bridges wants.

Mr. STAUFFACHER. I believe this can be off the record.

The CHAIRMAN. Off the record.

(Discussion off the record.)

Senator SALTONSTALL. What you now say makes all the more necessary, it seems to me, the definition of just what is a military department.

Mr. PACE. I think the emphasis is sound. I think it is fair to say, further, that the Hoover Commission in making its report spelled out virtually all of the conditions that would exist in an executive department and went a little further than those provided for the executive department in this bill. I think they had considered originally the kind of suggestion Mr. Eberstadt had made, and I think when a member of the Commission, probably Mr. Hoover, testifies, we will be in a position to spell out exactly the reasons for the inclusion of the kind of powers in the office of the Secretary of Defense, which are generally associated with the Secretaries of other executive departments.

May I proceed, Mr. Chairman ?

Senator BALDWIN. May I ask one further question?
The CHAIRMAN. Yes.

Senator BALDWIN. It is along the lines of the question I asked first, Mr. Pace.

In this bill there is the provision that a secretary of one of the services, there is no specific provision permitting him to bypass the Secretary of Defense. In preparing the budget for the Military Department, you, as the Budget Director, would have no hesitancy in calling in one of the Secretaries?

As a matter of fact, in your work you have to work very closely with the Secretaries and with the individuals in each department?

Mr. PACE. That is an excellent question. We work with the staff of the separate now executive departments and, if this bill is passed, to be military departments. We also work with the Secretaries involved.

I must point out while there is eliminated the express statutory authority of the Secretaries of Army, Navy, and Air to go to the Director of the Budget and the President, there is no prohibition against their doing so nor against either the Director of the Budget or the President going to them or calling them in or asking for their advice. It would seem to me that it would be a most unusual circumstance where a Secretary of Defense, working directly for the President, would seek in anywise to avoid that. I can't conceive of it.

In working on the budgetary matters, we naturally would work with the staffs and with the individuals involved. I think it will be interesting to this committee to see what the Secretaries themselves will have to say about this particular proposition, because they have worked with it and the power is one that is a power to them, and I think you will be interested in what they have to say.

Senator BALDWIN. Along the line of what Senator Bridges had to say, if I may make this one observation, I think the strength of our whole form of government and our whole system is that we have

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the advantage of thinking, even from the grass roots, in the services and everywhere.

I think in this bill we ought to keep that in mind and make it possible for the men along the line who are specialists in their particular fields to have their opinions and their judgment considered in the higher echelons. I think that is one reason why we won the war, that we depended upon an educated citizenry and an educated citizen soldier, and it was the accumulated thinking of 140,000,000 Americans that beat the high commands of the governments with which we were

at war.

The CHAIRMAN. It is remarkable that you should say that because just before Senator Bridges left, I said, "It looks to me like the committee is gradually arriving at the point of view where they want to give Mr. Johnson or whoever occupies the position of Secretary of National Defense more power or sufficient power in order to coordi nate and run it and run it efficiently and smoothly and at the same time leave an escape or a loophole or a privilege with those who served under him wherever they think something wrong is done to appeal to the parties who can correct the evil." I said, "That looks to me like where we are heading."

He said, "That is where I am heading."

Senator BALDWIN. And do it with impunity.

The CHAIRMAN. I think we will wind up, all of us, including the witnesses who testify, with the desire to make this department more of an administrative liability than it is today, to hold somebody responsible.

At the same time, because of the divergence of the three legs of the tripod, if any one leg is being kicked around, to leave an avenue open so they can come and get justice. It isn't going to be hard to work that out, I don't believe.

Senator KNOWLAND. Mr. Chairman, I would like to raise this point, and perhaps this isn't the time and place to go into it. It might be preferable to have an executive meeting where we can make a more searching inquiry.

But along these very lines I would like at some time an opportunity to develop in some detail the procedures on the budget arrangements for these three departments.

The CHAIRMAN. You mean the present or contemplated one?

Senator KNOWLAND. Both the procedures now and the procedures as contemplated. In other words, does the Director of the Budget, acting as an arm of the President, say to the services, "This is a top side limitation"-$15,000,000,000, $10,000,000,000, or $20,000,000,000, whatever it may ultimately be, depending on the state of world affairs. Or do the departments involved first come up and say, "In our judg ment, the defense of the Nation requires this," and then the cumulative total of the three come up to you and then you make such adjustments as are necessary? Or do you take the three departments and say, “We have a pie and we are going to equally divide it into three parts"? As I say, it may be more preferable to go into that later in executive session, but I think it is a fundamental question which we should all be familiar with.

The CHAIRMAN. I hope Mr. Pace in his testimony will bring in what the present procedure is, what this bill would do to the present

procedure, if anything, and what he thinks the procedure should be, so that you would have all three viewpoints.

Go ahead, sir.

Mr. PACE. I can speak to that point now or later.

The CHAIRMAN. I think it might not be a bad idea if you would speak to it now, if it doesn't throw your logic and sequence out of

The procedure as it currently exists, Senator, is a combination of the situations which you have described. From the point of view of establishing a budget for a given fiscal year let's take, for instance, fiscal year 1951 which is just coming up our staff is now working with the staffs of the various services on the problems that exist for 1951.

In approximately May of this year the Secretary of Defense, his budget officer, and if he sees fit, the three Secretaries of the three services, will come over and will present to the Director of the Bureau of the Budget their programing for 1951, where they anticipate rises, where they anticipate a substantial leveling off, where they anticipate a decrease.

From that we will try to point up the policy issues that arise. I then pose those policies, those policy issues to the President, who seeks the advice of those various staff agencies and Cabinet officers that he feels he needs advice from.

For instance, he might want to talk to the Council of Economic Advisers about the probable economic condition of the country in 1951. He would certainly want to talk with the National Security Resources Board about what the impact of any type of program would be on the current labor market and on the natural resources available to this country, both in this country and outside.

He would want to talk to the National Security Council and probably get their reaction as to what the effect of a certain area of national defense would be as it relates to the international problem. He would certainly want to talk to the Secretary of the Treasury about what the indications were in terms of receipts for that particular year.

We would provide him with certain factual information as to where certain policies would lead. From that the President sets a ceiling on the armed services, which was last year, I think, generally known as $15,000,000,000.

However, I think it should be explained that under the ceiling process-and this is not solely for the armed forces but exists for every department of the Government-and in that, incidentally, is included such proposed legislation as the departments have in mind at that time. There is also the proviso that if within that limitation it is impossible to include certain programs which the Secretary of Defense considers of imperative importance to the national defense, they shall be included in list of priority in what is termed the "B" list. The CHAIRMAN. Termed what?

Mr. PACE. Termed a "B" list. In other words, the list is what is to be included within the ceiling. That is, the "A" list. The "B" list is what cannot be included under the ceiling.

That information is transmitted to the Secretary of Defense. How he would handle his specific budgetary problem is not speci

fied by law. Normal procedure would be to refer to the Joint Chiefs of Staff a request for (a) what they might need in terms of providing adequate defense for the United States, and (b) what division would be made within the terms of the ceiling set by the President in terms of strategic responsibilities of the three departments.

The decisions of the Secretary of Defense would then in turn be transmitted, in terms of large programs, to the departments, who would come back up with their detailed programs related to dollar figures.

The ceiling amount set by the President would be transmitted in terms of program and divided among the departments according to the strategic decisions, and transmitted to the Bureau of the Budget. Our responsibility is in no wise to ascertain whether the strategic concepts are sound. We merely ascertain whether what they are seeking to do can be done more cheaply or whether dollar for dollar you are getting the best return to the taxpayers, for the taxpayers' dollar in that area.

We then transmit that to the President, who then reconsiders that. That is about November or December, some 5 or 6 months later. The President then goes through a similar process, determines what the amount of the budget shall be, and it is then transmitted to the Congress.

That is fundamentally the budgetary practice as it exists. Recommendations by the Hoover Commission placed great emphasis upon the budgetary process. They rightly say that it is the working program of the Secretary, and the principal way that he can know what is planned to happen within his Defense Department is that.

One problem that exists is that, because over a period of time different accounting systems have grown up, what might reflect a program in terms of dollars in the Navy would be inadequate for comparison in the Air Force or in the Army. The emphasis should be-and this bill would provide the Secretary of Defense with greater power to establish the kind of uniform accounting systems that would make what is done in the departments more meaningful both to the Secretary of Defense, the President, and the Congress when it gets to them.

It is also true that the Hoover Commission has recommended that a performance type of budget be established. That is separate and distinct from the considerations of this act, only again it was the opinion of Secretary Forrestal, it was the opinion of the men who worked in this area, it was the opinion of the Hoover Commission itself that if you give this kind of administrative power to a Secretary of National Defense, he can set up the kind of a system that will be both meaningful in terms of expressing what is happening and also meaningful in terms of determining where strategic emphasis can be laid in the Department.

In other words, it is difficult for the Secretary of Defense under current accounting systems to know exactly whether he is dollar for dollar getting the same thing in the Navy, in the Army, and in the Air Force. The proposed system would permit that to be done.

I am extremely happy to have a chance to spell out to you the long and rather intricate process that is involved in a budget ceiling that I don't think has been thoroughly and completely explained to the Congress.